Last Two Weeks in Korea - January 30, 2012

1. National

1) Students in Seoul got liberation?

   Seoul Education Superintendent Kwak No-hyun proclaimed the controversial students’ human rights ordinance that bans any kind of corporal punishment, continuing his clash with the central government and many parents and teachers nationwide. It took effect immediately in all elementary, middle and high schools in Seoul. It prohibits discrimination against students based on gender, religion, age, race, whether they are pregnant or because of their sexual identity. The ordinance allows students to stage rallies and loosens dress and hair codes in schools. The most controversial part of the ordinance is the banning of corporal and verbal punishments, which many parents and teachers say will lessen teachers’ authority and lead to students getting out of control. Critics say that Kwak does not understand the realities in the class rooms. 

The leftist Mr.Kwak was released from four months in jail last week after being fined 30 million won for election bribery last year, and he is the head of education in Seoul. Paris Hilton preaching teenagers to keep virginity until marriage ……  

2) Europeans image on Korea

Korea Trade-Investment Promotion Agency(KOTRA) asked 1,208 young people from 18 to 30 in five major cities in Europe what would come up as the first image when they think of Korea. North Korea was the first image with 9.1%, followed by K-Pop(6.9%) and Seoul (6.5%). Korean War was the fourth with 5.4% followed by Samsung(5.1%), Kimchi(2.7%), 2002 World Cup (2.4%), Taekwaondo (2.0%), science & technology (1.4%) and automobiles (1.4%).

 

What if the same question was asked to Americans who have not been to Korea?  Not sure, but M*A*S*H would be one of the top 3 answers.

2. Economy

1) Chaebol criticized over penetration into corner store business

It is like GE selling pan cakes and GM running coffee shops. While anti-corporate sentiment is brewing also in Korea due to widening wealth gap, President Lee Myungbak lashed out at third-generation scions of Chaebol owners for driving small business owners out of business, criticizing them for lacking business ethics. Lee added “If conglomerates keep invading into mom-and-pop stores, the public will harbor hatred against them.”  Big companies need act wisely.  Probably scared, Hotel Shilla announced it will walk away from its bakery and cafe brand Artisee just a day after Lee’s tough warning. Hotel Shilla is owned by Samsung Chairman’s first daughter.

While Korean conglomerates were the locomotive of Korean economy for over half a century, they have not been well respected as much by the public. An irony is that, while people accuse Samsung or Hyundai for being greedy and unethical, they want their kids get a job with Samsung or Hyundai.

3. Auto Industry

1) Chaebol criticized over penetration into corner store business

   HMC announced that its sister company Hyundai Powertech will supply its 6-speed transmission to Chrysler for its new Dodge Dart from 2012, with total volume of 770K to 2018. This will be 1.2 trillion won in sales. Hyundai worked together with Chrysler for the development of its World Engine produced in GEMA plant based on Hyundai’s Theta engine in 2005, so this will be the expansion of their cooperation in powertrain business.
  Hyundai Powertech was established in 2001 as the auto transmission company to supply to Hyundai and Kia. Located in Seosan city, one hour drive south west of Metaldyne Korea, Powertech celebrated its 10 million-th transmission on Dec 5 in 2011. Chung Myungcheol, the plant manager in Kia Slovakia plant until last month, is the new head of Hyundai Powertech. Mr.Chung, no relation to Chairman Chung Mongkoo, has spent most of his career in purchasing ever since he joined Hyundai 36 years ago. He has made the Slovakia plant a huge success, and Chairman Chung expects Mr.Chung repeat in Powertech what he did in Slovakia.

Regards,

H.S.

Last Two Weeks i n Korea - January 16, 2012

1. National

1) Cow farmers in protest at low prices

Angered by plummeting cow prices, cattle farmers tried to release hundreds of cows in front of Blue House, Korean version of White House, laying the blame on President Lee Myungbak and FTA with the U.S. he signed lately. They are shouting “Mr. Lee, you raise cow yourself!” Most of the farmers were blocked by the police on the highway before coming into downtown Seoul, though. The price of hanwoo (Korean beef) dropped 30% from its peak in 2009 to 4.4 million won ($3,800) per 600kg. There are total of 3.3 million live cows as of December, an increase from 2.9 million in 2009. The Agricultural Ministry said the right number would be around 2.6 million. To help the famers, the ministry said they would be replacing import beefs with hanwoo for consumption in the military.

As Korea has very small land the size of Indiana, with 70% of the land covered by mountains, Korean farmers would have hard time to compete if there is no protection against the low cost import beefs. The same story with chickens or pork. The only remaining livestock Korean farmers would still have clear advantage against the import would be, well, dogs.

2. Economy

1) Korea with the most low wage earner ratio in OECD

Korea Labor Institute reported that the ratio of low wage earners stood at 25.7% as of 2009, the highest ratio among the 34 OECD nations. Low wage earners are full time employees who ear less than two-thirds of the median age. The U.S. and Britain followed with 24.8%, and 20.6%, respectively. The report said the countries with higher levels of GDP and records of steep economic growth tend to create such poorly paying jobs. KLI added that “In most nations, low-paying jobs are persistent and recurring issues that can widen income and wealth inequalities.”

The key to reduce the number of low-paid workers is to lift the minimum wage. Korea’s minimum wage in 2011 was 4,320won (U$3.76), and will increase by 6% to 4,580won (U$3.98) in 2012. This number should be correct as this info came straight from my son who is working as a part timer at an auto supplier during this winter vacation.

3. Auto Industry

1) Hyundai gets the best news in a row

Hyundai Chairman Chung Mong-koo must be all smiles these days. Hyundai ranked No.1 for the first time in 2012 JD Power’s Customer Retention Study with 64%, pushing the likes of Ford, Honda and BMW aside. Hyundai’s Elantra won 2012 Car of the Year award at Detroit Motor Show, edging out Ford’s Focus and VW’s Passat. Chairman Chung has been named the second most influential person in Motor Trend’s 2012 automotive power list after Chrysler’s Sergio Marchionne. Despite the recent success in sales and quality, however, Chairman Chung is determined not to repeat the Toyota mistake, and is pushing its plants and suppliers for ultimate quality level. The new head of purchasing vowed in the annual supplies’ convention last week that Hyundai will treat its suppliers to the quality level each supplier demonstrates.

 I got kicked around last week when HMC visitors complained about Metaldyne Korea being not clean enough for ultimate quality level. I told my wife about HMC’s complaint and Elantra winning car of the year award. I got kicked around again, with my wife demanding full 8D report to explain why the heck then I left Hyundai.

2) Hyundai and Bosch to end its joint venture

A Hyundai official said Hyundai is seriously thinking about ending the JV relationship over KEFICO, a powertrain management systems components maker Hyundai, Mitsubishi and Bosch jointly set up in 1987. He added that Hyundai is reviewing the relationship over the JV business, and that Hyundai will still maintain supplier relationship with Bosch. KEFICO is currently 50:50 owned as Bosch bought Mitsubishi’s 25% shares in early 2000. The Hyundai official admitted that there has been friction with Bosch as Bosch has kept raising issues about using the Bosch designed products in Hyundai models. Analysts think that, while the separation can be a proof Hyundai can stand on its own in key powertrain technologies, there is a risk that Hyundai may be falling behind in world leading technologies without Bosch.

Bosch better think about ending the JV with Hyundai. Many foreign suppliers dying to become a Hyundai supplier as Hyundai plans to make 7 million vehicles this year, world’s No.5 with Ford and Honda behind. Here are three easy ways to become a Hyundai supplier. Hit one of them, and you will get a purchase order immediately.

*Your product is priced about half of what Hyundai is paying to current suppliers.

*Your product has technology that Hyundai has to have to sell cars.

*Your president is a very good friend of Hyundai Chairman Chung.

Regards,

H.S.